305-chapter-2-1203202994865556-2.pdf

2.1 © 2006 by Prentice Hall
2
Chapter
Information
Information
Systems in the
Systems in the
Enterprise
Enterprise

OBJECTIVES
• Evaluate the role played by the major types of
systems in a business and their relationship to
each other
• Describe the information systems supporting the
major business functions: sales and marketing,
manufacturing and production, finance and
accounting, and human resources
Management Information Systems
Chapter 2 Information Systems in the Enterprise

• Analyze the relationship between organizations,
information systems, and business processes
• Explain how enterprise applications promote
business process integration and improve
organizational performance
• Assess the challenges posed by information
systems in the enterprise and management
solutions
OBJECTIVES (continued)

• Challenge: monthly changes in fashions; Mango has
731 stores in 72 countries
• Solutions. Inventory replenishment system tracks all
sales and matches stores with inventory.
• Design teams meet weekly to adjust to trends.
• Distribution system allocates bar-coded items to
specific stores based on store/product mix.
• Reduces time to market, increases agility
• Increases accuracy of decision making
Mango Case: Fast Fashion, Hot Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Types of Information Systems
Figure 2-1

Different Kinds of Systems
1. Operational-level systems: support operational managers,
keeping track of the elementary activities and
transactions
3. Management-level systems: serve the monitoring,
controlling, decision-making, and administrative activities
5. Strategic-level systems: help senior management tackle
and address strategic issues
Three main categories of information systems serve
different organizational levels:

Major Types of Systems
• Transaction Processing Systems (TPS)
• Management Information Systems (MIS)
• Decision-Support Systems (DSS)
• Executive Support Systems (ESS)

The Four Major Types of Information Systems
Figure 2-2

Transaction Processing Systems (TPS)
• Basic business systems that serve the operational
level
• A computerized system that performs and records
the daily routine transactions necessary to the
conduct of the business

A Symbolic Representation for a Payroll TPS
Figure 2-3

Typical Applications of TPS
Figure 2-4

Management Information Systems (MIS)
Management level
• Inputs: High volume transaction level data
• Processing: Simple models
• Outputs: Summary reports
• Users: Middle managers
Example: Annual budgeting

Management Information Systems (MIS) (continued)
Figure 2-5

Management Information Systems (MIS) (continued)
Figure 2-6
A sample MIS report

Decision-Support Systems (DSS)
Management level
• Inputs: Transaction level data
• Processing: Interactive
• Outputs: Decision analysis
• Users: Professionals, staff
Example: Contract cost analysis

Decision-Support Systems (DSS) (Continued)
Voyage-estimating decision-support system
Figure 2-7

EXECUTIVE SUPPORT SYSTEMS (ESS):
• Inputs: Aggregate data
• Processing: Interactive
• Outputs: Projections
• Users: Senior managers
Example: 5 year operating plan

Model of a Typical Executive Support System
Figure 2-8

EXECUTIVE SUPPORT SYSTEMS (ESS) (Continued)
• Top Level Management
• Designed to the individual senior manager
• Ties CEO to all levels
• Very expensive to keep up
• Extensive support staff

Relationship of Systems to One Another
Interrelationships among systems
Figure 2-9

Relationship of Systems to One Another
In contemporary digital firms, the different types of
systems are closely linked to one another. This is the
ideal. In traditional firms these systems tend to be
isolated from one another, and information does not
flow seamlessly from one end of the organization to
the other. Efficiency and business value tend to suffer
greatly in these traditional firms

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
Sales and Marketing Systems
Major functions of systems:
• Sales management, market research, promotion,
pricing, new products
Major application systems:
• Sales order info system, market research system,
pricing system

Sales and Marketing Systems
SYSTEM DESCRIPTION ORGANIZATIONAL
LEVEL
Order
processing
Enter, process, and track orders Operational
Pricing analysis Determine prices for products and
services
Management
Sales trend
forecasting
Prepare 5-year sales forecasts Strategic
Table 2-2

Manufacturing and Production Systems
• Scheduling, purchasing, shipping, receiving,
engineering, operations
• Materials resource planning systems, purchase
order control systems, engineering systems,
quality control systems

LEVEL
Machine
control
Control the actions of machines and
equipment
Operational
Production
planning
Decide when and how many products
should be produced
Management
Facilities
location
Decide where to locate new production
facilities
Strategic
Manufacturing and Production Systems

Overview of an Inventory System
Figure 2-10

Financing and AccountingSystems
• Budgeting, general ledger, billing, cost accounting
Budgeting, general ledger, billing, cost accounting
• General ledger, accounts receivable, accounts
General ledger, accounts receivable, accounts
payable, budgeting, funds management systems
payable, budgeting, funds management systems

Financing & Accounting Sys
tems (Continued)
SYSTEM DESCRIPTION ORGANIZATION-
AL LEVEL
Accounts
receivable
Tracks money owed the firm Operational
Budgeting Prepares short-term budgets Management
Profit planning Plans long-term profits Strategic
Table 2-4

Human Resource Systems
• Personnel records, benefits, compensation, labor
Personnel records, benefits, compensation, labor
relations, training
relations, training
• Payroll, employee records, benefit systems, career
Payroll, employee records, benefit systems, career
path systems, personnel training systems
path systems, personnel training systems

Human Resource Systems (Continued)
LEVEL
Training and
development
Tracks employee training, skills,
and performance appraisals
Operational
Compensation
analysis
Monitors the range and distribution
of employee wages, salaries, and
benefits
Management
Human resources
planning
Plans the long-term labor force
needs of the organization
Strategic
Table 2-5

Human Resource Systems (Continued) An Employee Recordkeeping System
Figure 2-11

Business Processes and Information Systems
Business processes:
Business processes:
• Manner in which work is organized, coordinated,
Manner in which work is organized, coordinated,
and focused to produce a valuable product or
and focused to produce a valuable product or
service
service
• Concrete work flows of material, information, and
Concrete work flows of material, information, and
knowledge—sets of activities
knowledge—sets of activities
• Unique ways to coordinate work, information, and
Unique ways to coordinate work, information, and
knowledge
knowledge
• Ways in which management chooses to
Ways in which management chooses to
coordinate work
coordinate work
INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:
Introduction to Enterprise Applications

Business Processes and Information Systems (Continued)
• Information systems help organizations
Information systems help organizations
achieve great efficiencies by automating parts
achieve great efficiencies by automating parts
of processes
of processes
• IS also contributes to completely rethinking
IS also contributes to completely rethinking
processes.
processes.
• Business processes typically span several
Business processes typically span several
different functional areas.
different functional areas.

Examples of Business Processes
Manufacturing and production:
• Assembling product, checking quality, producing
bills of materials
Sales and marketing:
• Identifying customers, creating customer
awareness, selling
Table 2.6

Finance & accounting
Finance & accounting:
• Paying creditors, creating financial statements,
Paying creditors, creating financial statements,
managing cash accounts
managing cash accounts
Human resources
Human resources:
• Hiring employees, evaluating performance,
Hiring employees, evaluating performance,
enrolling employees in benefits plans
enrolling employees in benefits plans
Examples of Business Processes (Continued)
Table 2.6 continued

Business Processes and Information Systems
Cross-Functional Business Processes:
Cross-Functional Business Processes:
• Transcend boundary between sales, marketing,
Transcend boundary between sales, marketing,
manufacturing, and research and development
manufacturing, and research and development
• Group employees from different functional
Group employees from different functional
specialties to a complete piece of work
specialties to a complete piece of work
Example: Order Fulfillment Process
Example: Order Fulfillment Process

The Order Fulfillment Process
Figure 2-12

Systems for Enterprise-Wide Process Integration
Enterprise applications:
• Designed to support organization-wide process
Designed to support organization-wide process
coordination and integration
coordination and integration

Consist of
Consist of :
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems
Systems for Enterprise-Wide Process Integration
(Continued)

Enterprise Systems
• Enterprise systems, also known as enterprise
Enterprise systems, also known as enterprise
resource planning (ERP) systems, provide a single
resource planning (ERP) systems, provide a single
information system for organization-wide
information system for organization-wide
coordination and integration of key business
coordination and integration of key business
processes.
processes.
• Information that was previously fragmented in
Information that was previously fragmented in
different systems can seamlessly flow throughout
different systems can seamlessly flow throughout
the firm so that it can be shared by business
the firm so that it can be shared by business
processes in manufacturing, accounting, human
processes in manufacturing, accounting, human
resources, and other areas.
resources, and other areas.

Enterprise Application Architecture
Figure 2-13

Traditional “Silo” View of Information Systems
Within the business:
Within the business:
• There are functions, each having its uses of
There are functions, each having its uses of
information systems
information systems
Outside the organization’s boundaries:
Outside the organization’s boundaries:
• There are customers and vendors
There are customers and vendors
Functions tend to work in isolation
Functions tend to work in isolation

Traditional View of Systems
Figure 2-14

Enterprise Systems
Figure 2-15

Benefits of Enterprise Systems
• Help to unify the firm’s structure and organization:
Help to unify the firm’s structure and organization:
One organization
One organization
• Management:
Management: Firm wide knowledge-based
Firm wide knowledge-based
management processes
management processes
• Technology:
Technology: Unified platform
Unified platform
• Business:
Business: More efficient operations & customer-
More efficient operations & customer-
driven business processes
driven business processes

Challenges of Enterprise Systems
• Difficult to build:
Difficult to build: Require fundamental changes in
Require fundamental changes in
the way the business operates
the way the business operates
• Technology:
Technology: Require complex pieces of software
Require complex pieces of software
and large investments of time, money, and
and large investments of time, money, and
expertise
expertise
• Centralized organizational coordination and
Centralized organizational coordination and
decision making:
decision making: Not the best way for the firms to
Not the best way for the firms to
operate
operate

Supply Chain Management (SCM)
• Close linkage and coordination of activities
Close linkage and coordination of activities
involved in buying, making, and moving a product
involved in buying, making, and moving a product
• Integrates supplier, manufacturer, distributor, and
Integrates supplier, manufacturer, distributor, and
customer logistics time
customer logistics time
• Reduces time, redundant effort, and inventory
Reduces time, redundant effort, and inventory
costs
costs
• Network of organizations and business processes
Network of organizations and business processes

• Helps in procurement of materials, transformation
Helps in procurement of materials, transformation
of raw materials into intermediate and finished
of raw materials into intermediate and finished
products
products
• Helps in distribution of the finished products to
Helps in distribution of the finished products to
customers
customers
• Includes reverse logistics - returned items flow in
Includes reverse logistics - returned items flow in
the reverse direction from the buyer back to the
the reverse direction from the buyer back to the
seller
seller
Supply Chain Management (SCM)

Haworth’s Supply Chain Management Systems
Figure 2-16

Information from Supply Chain Management
Systems helps firms:
• Decide when and what to produce, store,
Decide when and what to produce, store,
and move
and move
• Rapidly communicate orders
Rapidly communicate orders
• Track the status of orders
Track the status of orders
• Check inventory availability and monitor
Check inventory availability and monitor
inventory levels
inventory levels

Information from Supply Chain Management
Systems helps firms: (Continued)
• Reduce inventory, transportation, and
Reduce inventory, transportation, and
warehousing costs
warehousing costs
• Track shipments
Track shipments
• Plan production based on actual customer
Plan production based on actual customer
demand
demand
• Rapidly communicate changes in product design
Rapidly communicate changes in product design

Customer Relationship Management (CRM)
• Manages all ways used by firms to deal with
Manages all ways used by firms to deal with
existing and potential new customers
existing and potential new customers
• Business and technology discipline
Business and technology discipline
• Uses information system to coordinate entire
Uses information system to coordinate entire
business processes of a firm
business processes of a firm

(Continued)
• Provides end- to- end customer care
Provides end- to- end customer care
• Provides a unified view of customer across the
Provides a unified view of customer across the
company
company
• Consolidates customer data from multiple sources
Consolidates customer data from multiple sources
and provides analytical tools for answering
and provides analytical tools for answering
questions
questions

Figure 2-17

Knowledge Management Systems
• Collects relevant knowledge and make it available
Collects relevant knowledge and make it available
wherever and whenever it is needed
wherever and whenever it is needed
• Support business processes and management
Support business processes and management
decisions
decisions
• Also link the firm to external sources of knowledge
Also link the firm to external sources of knowledge
• Support processes for acquiring, storing,
Support processes for acquiring, storing,
distributing, and applying knowledge
distributing, and applying knowledge

• There are extraordinary opportunities to use
There are extraordinary opportunities to use
information systems to achieve business value,
information systems to achieve business value,
and increase profitability
and increase profitability
MANAGEMENT OPPORTUNITIES, CHALLENGES, AND
SOLUTIONS
Management Opportunities:
Management Opportunities:

• Integration and the whole firm view:
Integration and the whole firm view: Given the
Given the
different interests and perspectives within a firm, it
different interests and perspectives within a firm, it
is difficult to achieve consensus about the need
is difficult to achieve consensus about the need
for the "whole firm" viewpoint.
for the "whole firm" viewpoint.
• Management and employee training:
Management and employee training: Training a
Training a
large number of employees on many systems in a
large number of employees on many systems in a
large organization involves commensurately large
large organization involves commensurately large
investments.
investments.
SOLUTIONS
Management Challenges:
Management Challenges:

• Accounting for the cost of systems and managing
Accounting for the cost of systems and managing
demands for systems:
demands for systems: Given the large number of
Given the large number of
different types of systems in a firm, and the large
different types of systems in a firm, and the large
number of people involved with using them, it is a
number of people involved with using them, it is a
complex task to understand which systems are
complex task to understand which systems are
truly necessary and productive with high returns
truly necessary and productive with high returns
on investment
on investment
SOLUTIONS
Management Challenges: (Continued)
Management Challenges: (Continued)

SOLUTIONS
Solution Guidelines:
Solution Guidelines:
• Inventory the firm’s information systems:
Inventory the firm’s information systems: Develop a
Develop a
list of firm-wide information requirements to give a
list of firm-wide information requirements to give a
360-degree view of the most important information
360-degree view of the most important information
needs of the firm.
needs of the firm.
• Employee and management education:
Employee and management education: Ensure that
Ensure that
you understand how much training is required.
you understand how much training is required.
• Account for the costs and benefits:
Account for the costs and benefits: Develop an
Develop an
accounting system for information services firm-
accounting system for information services firm-
wide.
wide.

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